Connect with us

Business

Finance: Learning to re-balance a portfolio

Legacy Phuket Gazette

Published 

 on 

Finance: Learning to re-balance a portfolio | The Thaiger
  • follow us in feedly

PHUKET: Portfolio re-balancing is one of the trickier aspects of investment management, as you will inevitably need to make some hard and counterintuitive decisions to ensure that your portfolio’s asset allocation continues to meet your investment goals and risk-tolerance level. But why, how and when should you re-balance your investment portfolio?

WHY YOU NEED TO TAKE WINNERS AND LOSERS OFF THE TABLE

Selling investments that have been big winners in the past in order to reinvest the proceeds in investments that have not performed as well (e.g. selling equities for bonds) will take a considerable amount of mental discipline on your part. After all, the “buy low, sell high” investment strategy works, but only if you have the emotional discipline to sell at the high point and not wait for the investment to go even higher.

Moreover, stock market plunges always provide a good reason for periodically re-balancing your portfolio because too many investors, especially retirees or near retirees, entered the dot com bust in year 2000 too heavily concentrated in tech stocks thanks to their run-up in value, while others entered the financial crisis with more than 90% of their portfolios concentrated in equities. These investors presumably failed to periodically re-balance their portfolios, which led to their asset allocations getting completely out of whack and, ultimately, to big and unnecessary losses.

Likewise, you need to periodically cut your losses on losing investments. For example, it may seem like you have nothing more to lose on an investment that’s down 50% as it “could always go back up,” but you need to remember that an investment down 50% will need to rise 100% in order for you to at least break even again.

It’s also important to remember that not only is the market and your portfolio changing over time as asset classes or sectors move in and out of favor, but so are your investment goals and risk-tolerance levels in relation to the performance of the market and your portfolio. This means that even if your portfolio’s asset allocation has managed to remain static, you may still need to re-balance your portfolio to ensure it continues to meet your changing risk profile and investment goals.

KEY RE-BALANCING CONSIDERATIONS

Although portfolio re-balancing is critical for maintaining your investment strategy and for helping you to avoid unnecessary risk, it’s not something you should follow slavishly (e.g. you don’t need to re-balance a 60% / 40% equity / bond portfolio when the equity portion suddenly becomes 60.5%) nor should you automatically re-balance your portfolio’s assets on a set date every year.

Instead, talk to your financial adviser about setting some basic thresholds. For instance, if your asset allocation shifts 5% or more, or some of your investments have made significant moves, then it might be time to set up a meeting to figure out how to re-balance things. In fact, you may need to re-balance your portfolio a couple of times a year in a very active market or you may not need to re-balance it at all.

There may also be times when you need to re-balance your portfolio in order to take advantage of so-called “tactical” opportunities which periodically present themselves. Allocating a portion of your portfolio to beaten down home-builder stocks, which started bouncing back in mid-to-late 2011, would have been a good tactical investment at the time, while now might be the time to take some or all of your profits off the table.

Finally, and before you over-re-balance your portfolio, remember that too much selling out of high performing assets in a bull market or too much buying and selling in general that racks up commissions or fees, can negatively impact your long-term investment returns. In other words, re-balancing an investment portfolio is more of a balancing act and an art form rather than an exact science.

If you have not re-balanced your investment portfolio in some time, call me and we can discuss how to do so.

Don Freeman is president of Freeman Capital Management, a Registered Investment Advisor with the US Securities Exchange Commission (SEC), based in Phuket, Thailand. He has over 15 years’ experience and provides personal financial planning and wealth management to expatriates. Specializing in UK and US pension transfers. Call 089-970-5795 or email: freemancapital@gmail.com.

— Don Freeman

Keep in contact with The Thaiger by following our Facebook page.

Never miss out on future posts by following The Thaiger.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

Business

Turbulence ahead for Thailand’s aviation industry | VIDEO

The Thaiger

Published

on

Turbulence ahead for Thailand’s aviation industry | VIDEO | The Thaiger

When the airlines, in particular, were asking the government to put their hands in their pockets for some relief funding in August last year, it was genuinely thought that international tourists would be coming back for the high season in December and January. At the very least local tourists and expats would head back to the skies over the traditional holiday break. And surely the Chinese would be back for Chinese New Year?

As we know now, none of that happened. A resurge in cases started just south of Bangkok on December 20 last year, just before Christmas, kicking off another round of restrictions, pretty much killing off any possibility of a high season ‘bump’ for the tourist industry. Airlines slashed flights from their schedule, and hotels, which had dusted off their reception desks for the surge of tourists, shut their doors again.

Domestically, the hotel business saw 6 million room nights in the government’s latest stimulus campaign fully redeemed. But the air ticket quota of 2 million seats still has over 1.3 million seats unused. Local tourists mostly skipped flights and opted for destinations within driving distance of their homes.

As for international tourism… well that still seems months or years away, even now.

Keep in contact with The Thaiger by following our Facebook page.

Never miss out on future posts by following The Thaiger.

Continue Reading

Business

Domestic air passenger numbers double those of January

Maya Taylor

Published

on

Domestic air passenger numbers double those of January | The Thaiger
PHOTO: Vietjet

Passenger numbers on domestic flights within Thailand have doubled within a month, rising from 4,000 in January to over 10,000 this month. Having nearly recovered to pre-pandemic levels, domestic travel plummeted once more when Covid-19 resurfaced late last year.

Apirat Chaiwongnoi from the Department of Airports says 15 of Thailand’s 29 airports are now operating domestic flights, with more expected to follow. He believes the aviation sector will continue to recover further in the coming 6 months, bolstered by the national vaccine rollout.

Around 120 domestic flights a day are now operating, which is twice the number that were operating at the lowest point in the crisis. Prior to the resurgence of the virus in December, domestic passenger numbers had recovered to 30,000 – 40,000 a day, around 80% of pre-pandemic numbers.

The DoA says airports must continue to adhere to the Covid-19 hygiene measures put in place by the Health Ministry and the Civil Aviation Authority of Thailand.

SOURCE: Bangkok Post

Keep in contact with The Thaiger by following our Facebook page.

Never miss out on future posts by following The Thaiger.

Continue Reading

Coronavirus (Covid-19)

Samut Sakhon’s shrimp market to remain closed until February 15

Avatar

Published

on

Samut Sakhon’s shrimp market to remain closed until February 15 | The Thaiger
PHOTO: Kom Chad Luek

Samut Sakhon’s Central Shrimp Market, the epicentre of Thailand’s recent wave of Covid-19, will remain closed until February 15. The market can reopen once the overall hygiene situation at the market and surrounding area has improved, according to the province’s disease control committee.

Local officials say the shrimp market needs to remain closed until the market structure and nearby residential facilities are inspected. People who violate the order face up to a year in prison and a fine up to 100,000 baht.

More than 12,000 people in the province have tested positive for Covid-19. The increasing number of infections is a result from the active case finding to contain the spread of the virus.

SOURCE: Thai PBS World | Thairath Online

Keep in contact with The Thaiger by following our Facebook page.

Never miss out on future posts by following The Thaiger.

Continue Reading
Phuket Thai food treats you need to try | VIDEO | The Thaiger
Tourism2 days ago

Phuket Thai food treats you need to try | VIDEO

Thailand News Today | Bars, pubs and restaurants ‘sort of’ back to normal | Feb 23 | The Thaiger
Thailand2 days ago

Thailand News Today | Bars, pubs and restaurants ‘sort of’ back to normal | Feb 23

In search of Cat & Dog Cafés in Phuket Town | VIDEO | The Thaiger
Tourism2 days ago

In search of Cat & Dog Cafés in Phuket Town | VIDEO

Thailand News Today | Gambling crackdown, Seafood market to reopen, Vlogger challenge | Jan 21 | The Thaiger
Thailand1 month ago

Thailand News Today | Gambling crackdown, Seafood market to reopen, Vlogger challenge | Jan 21

Thailand News Today | Covid testing for visas, Business impact, Vaccine approval | January 19 | The Thaiger
Thailand1 month ago

Thailand News Today | Covid testing for visas, Business impact, Vaccine approval | January 19

Thailand News Today | Weekend Bangkok bombs, Thailand fires, Covid update | January 18 | The Thaiger
Thailand1 month ago

Thailand News Today | Weekend Bangkok bombs, Thailand fires, Covid update | January 18

Thailand News Today | Stray car on runway, Indonesian quake, 300 baht tourist fee | January 15 | The Thaiger
Thailand1 month ago

Thailand News Today | Stray car on runway, Indonesian quake, 300 baht tourist fee | January 15

Thailand News Today | Governor off respirator, sex-trafficking arrest, condo prices falling | January 14 | The Thaiger
Thailand1 month ago

Thailand News Today | Governor off respirator, sex-trafficking arrest, condo prices falling | January 14

Thailand News Today | Chinese vaccine, Thailand ‘drug hub’, Covid update | January 13 | The Thaiger
Thailand1 month ago

Thailand News Today | Chinese vaccine, Thailand ‘drug hub’, Covid update | January 13

Thailand News Today | Bangkok may ease restrictions, Phuket bar curfew, Vaccine roll out | January 12 | The Thaiger
Thailand1 month ago

Thailand News Today | Bangkok may ease restrictions, Phuket bar curfew, Vaccine roll out | January 12

Thailand News Today | Covid latest, Cockfights closed down, Bryde’s Whale beached | January 11 | The Thaiger
Thailand2 months ago

Thailand News Today | Covid latest, Cockfights closed down, Bryde’s Whale beached | January 11

Thailand News Today | Southern floods, Face mask fines, Thai Air Asia woes | January 8 | The Thaiger
Thailand2 months ago

Thailand News Today | Southern floods, Face mask fines, Thai Air Asia woes | January 8

Thailand News Today | 305 infections, No happy ending for massages, Phuket quarantine mooted | Jan 7 | The Thaiger
Thailand2 months ago

Thailand News Today | 305 infections, No happy ending for massages, Phuket quarantine mooted | Jan 7

Thailand News Today | 10,000 schools closed, 900 new migrant infections, Gambling crackdown | January 6 | The Thaiger
Thailand2 months ago

Thailand News Today | 10,000 schools closed, 900 new migrant infections, Gambling crackdown | January 6

Thailand News Today | PM reverses lockdown, Southern P.D.A. crackdown, Covid update | Jan 5 | The Thaiger
Thailand2 months ago

Thailand News Today | PM reverses lockdown, Southern P.D.A. crackdown, Covid update | Jan 5

Follow The Thaiger by email:

Trending